tv [untitled] June 2, 2012 7:30pm-8:00pm EDT
you're watching our t.v. just in time for a recap of our headlines egypt's also president hosni mubarak begin serving a life sentence for his part in killing hundreds of protesters last year meanwhile tension escalates outside the courts as demonstrators furious with the bed continue to rally into the night. blood in me to putin involved to do all he can to prevent syria from sliding into a civil war insisting russia is not taking sides in the conflict the missile defense shield and economic cooperation also came into focus as russia's president visited his german and french counterparts. and having your say on our team could
get you sacked in large via and estonia especially if you come out in defense of russians several people who call for equal rights have ended up on security blackness including foreign minister sergei lavrov. taking a hard snag so got a bridge as treasury chief into trouble then max and stacey really make him feel the heat next in the kaiser report. stronger this is the kaiser report on believable transfer versus surrounding a pretty strict. past the max. whop it's actually this one's kind of cold i deserve a rebate on that yes george i was born forced into pasty tax u. turn while we have been here the tax was twenty percent on any food served at bob
b. and temperature and it was seen as symptomatic of a government out of touch with ordinary working people cameron had defended the move designed to put twenty percent that on all food sold above ambient temperature insisting that he loves of pasty well known as politicians are not above and beyond temperature along these m p's are actually cadavers are roaming around the white all house of commons and zombies repeating the same old shit over and over again but you're right to say it is passed on pastry and we've been fighting the good fight for the people of cornwall for a number of years you know they sought regional distinction for the cornwall pasty and they deserve it like parma has the parma ham on the parma cheese the people of cornwall deserve regional distinction for the cornish pasty and i suggest that they go with this triumph and now by getting the exemption from osborne's hot food and
being just out of the oven but before it's in the freezer before it drops at the train station attacks and push it further they've got the momentum next kick out all the celebrity chefs from cornwall so max perhaps george osborne to get back with the common people say opes i made a mistake i didn't mean to tax cornish pasty i meant to tax. home counties pay steve but is he above ambient temperature so what are you know so we go from pasties to cookie jars analysis j.p. morgan dips into cookie jar to offset london whale losses yes you know j.p. morgan lost all that money right there there we are in london do you see the london whale so. hopping through the background right munching on the plankton of fraud the krill of accounting miss leisure domain he's right here with all the other big
time financial crooks in london stacey this is where they breed this is where they live then they're so happy with the fraud they're committed in the city of london that the olympic event for the summer for olympic pulling a using fraudulent polls as it should was fantastic well to remind people what happened with j.p. morgan is they made a giant huge bet on the corporate credit default swap market they cornered the market and they were the only guys there along everybody else took the other side against them they're attacking attacking attacking they're still attacking but j.p. morgan chase and company has sold an estimated twenty five billion dollars of profitable securities and an effort to prop up earnings after suffering trading losses tied to the banks now infamous london whale compounding the cost of those trades c.e.o. jamie diamond earlier this month said the bank sold corporate bonds and other securities pocketing one billion dollar in gains that will help offset more than
two billion dollars in losses as a result the bank will not have to report as big an earnings hit for the second quarter well yeah exactly this let me explain how it works with j.p. morgan and the banks on wall street it's all about reporting consistent earnings and some growth in earnings consistently over every quarter for a number of years in a row this gets the stock price higher it gets the multiple higher it increases the value of the option the stock to the stock price which end up in the pockets of the executives like jamie diamond now in order to report consistently higher earnings what jamie diamond does is on his balance sheet he has the official numbers he reports to regulators and then off the balance sheet he has one group of trades that are to. i in case of one outcome and an opposite group of trades tied to an opposite outcome and at the end of the quarter depending on which is profitable and which is not he recognizes those traits at the exclusion of the other traits it's
fraud it's similar to lehman brothers repo one o one scam or one o five scam it's something we did on wall street for many years called to look back trade and he practices it in the multi-billion dollar multi-trillion dollar level he's a fraudster and the fact is allowed to continue doing this is a shock going to shame well max one thing we hear over and over is that crash j.p. morgan by silver cannot work because they are whales they are too big they are connected to the federal reserve bank here they are they have had to sell twenty five billion dollars in securities in order to make up one billion in gains they really made two stupid decisions said lydon turner a consultant and former chief accountant of the securities and exchange commission the first was taking risks with derivatives that they did not understand the second is selling assets with high income that they cannot replace in
a low interest rate environment the bank will struggle to generate as much income with the cash they received from selling the security is an excellent point in other words to offset one billion they've sold twenty five billion before having to liquidate the twenty five billion they held those securities on the books at a much higher valuation but to actually sell them in the open market to cover the one billion they had to recognize it as a much lower valuation of what it truly is so the value at risk accounting fraud has been exposed right here in this very chance action and it's exactly correct to suggest that the crash j.p. morgan by suv or campaign is working because you nibble at the fringes of the balance sheet forced them to recognize losses on their naked silver short positions and they have to liquidate. for every dollar physical so retake off the market they've got to encumber themselves with another hundred dollars in debt or fresh losses exactly and twenty five billion dollars remember they leverage up they re
hypothecate right here in the city of london by infinite amounts so who knows how much that has really d. leverage them in terms of how much leverage they have over the commodity markets right and when they're unwinding or deal leveraging and they're recognizing debt suddenly then the governments end up inheriting that debt at the point of a financial gun and then they turn around and impose austerity measures the cute little funny thing here max from the reuters article we're talking about taxes the pasty tax and the pace to tax taxes on the gains if calculated at the thirty eight percent tax rate that j.p. morgan uses to illustrate its business to analysts would mean a three hundred eighty million cost to realize they gave another baked into the cake money losing situation well max do you really really what's the answer to this question do you believe j.p.
morgan is going to pay one dollar of taxes on that game as i just explained when it comes time to pay their taxes they will suddenly draw down from their off balance sheet magical domain losses equal to those gains to offset to create no taxable income that's called a look back i did it all the time on wall street at the end of the quarter you call a client you put on a spread in the options market you take that realize loss you give the account number post trade and they park in the corporate balance sheet and it offsets the game so you pay no taxes so no they were paying taxes because it's got of lots of losses waiting to be drawn down when it's convenient well j.p. morgan had to sell their profitable trades just as america and the rest of the world have been selling off their. i'm producing assets in order to pay off all of the losses that j.p. morgan goldman sachs merrill lynch lehman brothers a.i.g. made off m.f. global all of these losses are being paid off by us selling our income producing
assets so welcome to the club jamie diamond. greece is a good example right they are paying off the austerity that's being artificially imposed upon them by selling all their income producing assets the lottery the shipping the infrastructure the roads the tunnels those are being sold off that's the income so you're selling the cows to buy milk it's a recipe for economic catastrophe and indentured servitude oh that's what they want speaking of intention servitude of course the queen is riding around town today going to tell you she doesn't perhaps have the heart to tell the people that it is the i.m.f. who is dictating policy i.m.f. calls on bank of england to cut rates the international monetary fund has called on the bank of england to cut interest rates and resume printing money to boost demand in the economy it has also asked the u.k. government to prepare a plan b.
for deficit reduction if these measures do not work well of kuku or it's because they got rid of this pasty tax they're now another seventy million pounds short right this is another economic fallacy you hear from the bank of england and the federal reserve bank or paul krugman makes the same mistake they're always focusing on aggregate demand but they fail to recognize that you need some supply you need something to sell you need manufacturing you need wages you need capital for capitalism but they say no no we don't need actual capital all we need is debt for as our farmers you know i can see interest rates near zero and fake demand will get fake demand for the economy even though it's creating social unrest and revolution and we create fix. supplying the precious metals markets with you know make good sales in the silver futures markets and two other things you know what they're really saying is they want more redistribution of wealth from savers to banks and
debtors i.m.f. said further monetary easing reserve quired should happen with more quantitative easing and a cut in the point five percent interest rate the last move from the mervyn king his bank of england moves five billion pounds from savers to speculators and before that already has sixty five billion pounds from savers to speculators these are people living on a pension these are the older people that thought they had a retirement income suitable to live on their interest rate is zero thanks to mervyn keynes financial repression that's what they call an economic circles it moves income that would have gone to granny over to the pockets of george osborne's toff buddies down on pasta street and various other clubs where there sipping on cranberry martinis you know ogling each other and thinking that oh they're just completely full of themselves for having pulled off this magic trick of starving
granny to enrich to talk speculator and then finally max so here they keep it saying print more money to cover up all of jamie diamond's mistake sell off our you know income producing assets to pay off all of jamie diamond mistakes c f t c chief criticizes swaps bill post j.p. morgan so the nation's top commodities regulator that the united states might they said he was concerned about legislation under consideration in the house that would exempt derivatives transactions made by offshore branches of a u.s. bank from regulation required by the dot frank act the bill introduced by representative scott garrett republican of new jersey would exclude from the crisis reform statute derivatives transactions between a london branch of a u.s. bank and on. shore entities right once again at the end of the quarter when jamie diamond aims to manufacture a last means to reach into that pool of off balance sheet offshore derivatives trading with the now lobbying to be exempt from any kind of reporting standards
pull out loss out of magical thin air derivatives dark exchanges and dark pools it winds up on his balance sheet suddenly and now he has no taxable gain so it's a slush fund is what it is and they want to legalize the slush fund and the ponzi scheme steal from the savers gut the manufacturing and force people into situations where they are indentured servants because after all that's what the queen would prefer isn't it and we must balance before the queen she's our monarch and lorn she doesn't want us to work but borrow too we die because we're addicted servants on or for can plug. when is sid vicious going to come back and sing about this properly go past almost. report thank you maggie don't go away much more coming away so stay right there.
with the. technology innovation. developments around russia. the future. good lumber tour. to build a. mission to teach creation and why you should care about. why you should want to. welcome back to the kaiser report imax guys are time now to turn to simon rose of save our savers dot co dot. com has a report thank you very much max all right this is really fantastic we've been talking about our all. since the crisis began tell us how much wealth has been
redistributed from british savers to the debtors the bankers the speculators well we reckon given that there's about one point one trillion pounds worth of savings in the u.k. . but you're talking of something of the order of about one hundred and two billion pounds which would pay for the olympics ten times over every time irving carryings opened his mouth and darts about quantitative easing what he's saying is he wants to take more money out of the pensioners pockets and savers pockets and give it to the debtors right yes he's slightly more subtle about what he wants to do to be in the deputy governor is less subtle he keeps saying save us to stop winning and just go out and get spending but you know frankly if you spend your life trying to put a bit of money by if you're old age that is not really the message you want to hear from the bank of england rattus also. go bankrupt with that kind of thinking now who devised this redistributive policy work how does it work does it come from what quango thought of this god awful mess who thought when the i mean essentially you know we used to an economy that worked when the base rate was actually above
inflation and that went on with a one time exception from the late fifty's through the crisis hitting that is how things worked and suddenly when the crisis hits they slam based resound no point five percent but then suddenly that is an emergency measure which we told it was if you just kept it that people use a sound financial repression meaning that the bank is involved in an institutionalized form of repression by keeping rates artificially low this quantitative easing is not the natural rate rates would be if the banks simply got out of the way yeah absolutely and it's you know we grumble because we represent savers and savers are having a terrible time of it some people who got mortgages say well i'm all right that's fine but it has such a massive effect you know money has a price the same as anything else and if you suppress the price of money then it turns out all the wrong signals the economy does not work we've seen that three years of virtually zero interest rates and ease gumming up the economy what
happens is that the banks can actually function the normal way so they take greater risks savers who can actually get a decent rate of return they might take. to risks the whole economy does not work if you have interest rates at this level what is the bank doing suppressing like this surely we're supposed to be living in a free market economy and what is happening is that just de capitalizing the country now imagine armadas there and going back to the origins of the us of mass you know the two thousand and seven two thousand and eight period there as the subprime crisis in the states and of course terry had the collapse of northern rock and there is huge crisis of bankruptcy bradford and bingley and they were offering these one hundred twenty percent mortgages and the liar loans with one hundred twenty percent mortgages they were offering bigger loans than the underlying value of the house even when the value was cut by the appraisers they came in with fraudulent appraised values and that's what it sounds like that's they want to go back to what they would not you that's what they want to go back to at all the
problem is we're so heavily indebted to this country that they've got no option they painted themselves into a corner when i bought my first place two and a half time salary is what you were allowed and that seemed to work fairly well and then somehow through the first ten years of this century so how boring for all manner of things just became acceptable and we're now floating on a sea of debt in this country it is quite extraordinary charges that the savings has been undermined is that the debt has escalated out of control i know not only in the u.k. but it is extraordinary and what's more we now have these pathetic pettifogging all humans between politicians about whether we should have growth or a strategic i mean that's not what the argument should be or the market argue it should be about looking at actually below level of debt in the u.k. we had our deputy prime minister a man called nick clegg the other day actually saying that in the next six or seven years what they were doing was getting rid of the debt because we have to have a clean slate for our children and our children's children and you think. when the
deputy prime minister of the country come till the difference between the deficit and the debt but really shows perhaps why we're in such an appalling mess it's a difference that even the chance of the should go wrong a couple of times in the budget but there is a sector in the economy that benefits from creating trillions of debt and then of course is the banking sector the same to have incredible leverage in lobbying influence in governments around the world including this government and they're not crying that the debt levels are exploding because they make money processing creating this debt and in dealing with the servicing of this debt and there is this idea of what's called the fire economy fire insurance and real estate we talked about the mortgage market we talked about the sub prime we talked about brad from bailing going bankrupt so this is all part and parcel of this fire economy that's all based on securitization of assets like mortgages to create them in
a tradable securities and it all ends up going into the city of london and it squeezes out right in saying simon rose that this squeezes out to some degree or perhaps a very large degree other productive aspects of the economy your thoughts you know up i used to think i confess that people are talking the banks was a little unfair but they're not to keep it up to i mean three hundred twenty five billion pounds of course has to be seen whether it's gone just sitting in the bank stopping use for anything useful i can remember when banks have essentially two roles they would help people with their household finances and they would support companies they would help them raise money that would help them buy other companies what does all the rest of it for let me let me jump in right quick here because this notion in this country a lot of the media banker bashing that it's unfair there's too much of it and there's a lot of character assassination i know i engage in it myself all the time but some of us let's break it down as economists it's not about character assassination and
ad hominum attack. and banker bashing is the fact that you've got this one sector of the economy that's growing like a cancer at a rate of cancer but it does in the world do you start productive it doesn't air anything to the underlying fabric of the economy that's sustainable and productive it just. is unfair and it which is totally dependent on debt the moment the fact that the extra money stops being produced they're in deep trouble the bank of england actually brought out a report. which i suspect the movie can probably didn't see before get out the door he probably would have stopped it saying that in fact by bailing out the banks what we are doing is setting ourselves up for an even bigger collapse to come and the implicit subsidy to the banks or being bailed out is worth two hundred twenty billion pounds of the two years and they're paying themselves much more in terms of profits and pay as a result what when even the bank of england realizes that what has happened is obscure palling then you know everything you have been saying about them frankly is
true well as you know mervyn king he is kind of an interesting figure because he unlike ben bernanke is obviously drunk the kool-aid who is has no wavering doubt about his certainty in matters of monetary policy moment kings seems to make some statements there where he is has some doubt about all of this fiddling going on it but does he have any power ultimately or to see defer to the i.m.f. because this is or other world organizations other banking this seems like there's a lot of power now with the i.m.f. world bank these other global or banking institutions the bank of international settlements to be i.a.'s who are really calling the shots more and more you know here we have burman king seemingly deferring to some greater authority it is that what's going on there are i'm not sure he would or you go through he doesn't i mean he heads our own monetary policy committee which is tasked with ensuring the stability of the pound. particularly yes absolutely as
a result is inherently bad for the country but i. does he know when there are two problems either he knows in which case he should be doing or doesn't that we wish he probably shouldn't be the governor of the bank of england so it's just a quick air well yeah and he claims you know now you've probably heard the speech he made recently in which he basically came nothing was to do with him at all it wasn't his fault the fact that he presided over a very lax monetary policy while the bubbles were building seems apparent this attention entirely but the m.p.c. has been going for fifteen years they've been told to keep inflation to two percent by successive chancellors and over that time the r.p.i. the measure of inflation that most people would use not the one of course the government now uses has gone up by fifty three percent but a lot of staples the things that i mean we're concerned because a lot of savers particular people are pensions things they have to buy things like eggs and flour and petrol and coal and. that's of the mill a lot of things have doubled in price in just fifteen years so the main reason for
the m.p.c. which is to keep our currency at a sensible level and not to let it be undermined completely it's just a failed entirely m.p.c. monetary policy committee you know yes i'm sort of never seeing you know having you know not nine men usually men good and true almost all academic economists most of them with no experience of the real world at all and all macro economists or central planners absolutely in a purportedly account well what exactly you have kept to have kept base rates at no point five percent since march two thousand and nine neighboring assisting point there you've got to doing economic forces you see the price of stuff that people are buying at the shop is going up rapidly but you've got house prices are still in other parts of the economy the bond market and other areas like greece etc experiencing deflation and you could call their exploding so you have these two these two forces in the economy is it be me ask you this is
a because we're seeing. thing. that we haven't seen before which is an organic kind of growth of policies that have gone out of control or have our financial engineers that have been so active architecting this economy invented a way to keep prices higher without ever seeing labor costs rise well certainly at the moment i mean cost of wages is rising much less than the price of fractions why most normal people who don't work in the city in this country are feeling poor all the time and why it would be so depressed how did they manage to do that to get as surprised as a go i keep the cost of labor you know down here is that by design or by default think they're clever enough to think i think by design no not as a tool but it's you know it's very simple if you start producing extra money where does it go it goes into the city but by the time it gets down to the lower level student me prices have already gone up you say goes into the city but the banks of
the city are now majority owned by the taxpayer how are they going to war yet at the taxpayers not seeing much benefit from that right i mean interventions of course something like one point three billion pounds we have going to see any of that back you know does that sit on the company's balance sheet are they actually declaring that as being part of the deck no of course they're not just like they're not declaring any of the future liabilities is being dead so i pretended in the debt is not there at all but it's crazy the problem is that we have not actually corrected anything that was wrong before we went into this crisis so. it's a christmas past mine conservatory for me. what you think is the pantomime horse richard a bit later i leave that up to you to decide so i'm going to read a time thanks for being on the kaiser report and that's going to do it for this edition of the kaiser report with me max kaiser and stacey herbert and i thank my guests simon rose of save our savers going to send me an email please do so at kaiser report at r t t v dot are you it's an excellent next guys are saying.